Camerons Hardware Inc; Frank Lobb; Jeffrey Lobb; Kristen McDermott v. Independence Blue Cross

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 09-1973
CAMERONS HARDWARE INC;
FRANK LOBB; JEFFREY LOBB; KRISTEN MCDERMOTT
v.
INDEPENDENCE BLUE CROSS; INDEPENDENCE BLUE CROSS;
AETNA INC; RONALD A. WILLIAMS; JOSEPH A. FRICK;
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENTS OF HEALTH AND INSURANCE
LAWRENCE M. OTTER,
Appellant
(pursuant to Fed. R. App P. 12(a))
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 08-cv-00015)
District Judge: Honorable Juan R. Sanchez
Submitted Under Third Circuit LAR 34.1(a)
January 15, 2010
Before: SCIRICA, Chief Judge, BARRY and SMITH, Circuit Judges
(Opinion Filed: January 29, 2010)
OPINION

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Otter has filed an appendix without continuous pagination. Accordingly, we cite not1
to the appendix, but to the relevant documents.
At the April 2008 hearing on the motions to dismiss, “the court – clearly leaning2
toward granting the motions to dismiss – directed the Commonwealth agencies to file a
motion for attorneys’ fees too.” (Commonwealth’s Br. at 7-8.) The Commonwealth
sought $6,352.50, and IBC sought $35,436.91 in fees and costs. Otter does not now – nor
did he before the District Court – oppose these calculations. (July 28, 2008 Sanctions
Order at 16.)
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BARRY, Circuit Judge
Appellant Lawrence Otter appeals an order holding him in civil contempt for
failing to pay attorneys’ fees and certain costs previously imposed as a sanction by the
District Court. We will vacate in part the order of the District Court and remand for
further proceedings consistent with this Opinion.
BACKGROUND1
This appeal emanates from a 2008 ERISA action in which various plaintiffs –
represented by Otter – sued Independence Blue Cross (“IBC”), the Commonwealth of
Pennsylvania’s Departments of Health and Insurance (“the Commonwealth”), and other
defendants not relevant to this proceeding. IBC and the Commonwealth each filed
motions to dismiss the complaint, with IBC also filing a motion for sanctions, including
attorneys’ fees and costs, pursuant to Rule 11 of the Federal Rules of Civil Procedure and
28 U.S.C. § 1927. Thereafter, the Commonwealth also filed a motion for attorneys’ fees
pursuant to 28 U.S.C. § 1927. The substance of the motions to dismiss, as the2
Commonwealth summarizes it, was that “the claims that plaintiffs were trying to raise . . .

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With respect to IBC’s motion, sanctions were ordered against Otter and three other3
parties; however, the Commonwealth’s sanctions motion was directed only at Otter.
In Doering, we explained that a district court should consider a variety of “equitable4
considerations” both when deciding whether to impose sanctions and when determining
the appropriate amount of those sanctions. 857 F.2d at 197. We listed “[o]ther mitigating
factors which a district court may consider in the context of Rule 11” such as, for
example, “the attorney’s history of filing frivolous actions . . . , the defendant’s need for
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had been raised before, in proceedings involving several of the same parties (and counsel)
now before the district court, and every court to have considered these claims had rejected
them.” (Commonwealth’s Br. at 6.) On April 25, 2008, the District Court granted the
motions to dismiss.
On July 28, 2008, the District Court, after a hearing, granted the motions for
sanctions. The Court concluded that “[a]t the time Mr. Otter filed the Complaint on3
behalf of his clients, he had been informed four times previously his claim had no basis in
fact or law. Yet, he unreasonably brought the same claim without any additional law or
evidence to support.” (July 28, 2008 Sanctions Order at 12-13.) Noting that “it is
difficult to imagine a better example of frivolous, vexatious, and unreasonable
multiplicity of proceedings or the continued pursuit of a baseless claim in the face of
several irrebuttable defenses,” the Court determined that sanctions were appropriate. (Id.
at 11.) The Court found that Otter “did not challenge the amount of the fees and costs
claimed,” and held that the “little mitigating evidence” put forth was insufficient to
reduce the “unopposed lodestar calculations” under the factors articulated in Doering v.
Union County Board of Chosen Freeholders, 857 F.2d 191 (3d Cir. 1988). (Id. at 16.)4

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compensation, the degree of frivolousness,” and the willfulness of the offender’s actions.
Id. at n.6 (internal citations omitted).
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The Court ordered payment of sanctions within thirty days of the Order. Otter did not
appeal.
Neither the Commonwealth nor IBC received payment within the thirty day period
prescribed by the District Court, and so, in November 2008, they filed motions to hold
Otter in civil contempt. The Court held a hearing on March 5, 2009. Otter did not submit
a response to the motions; rather, on the date of the hearing, attorney Frank Marcone filed
– on Otter’s behalf – a motion to vacate the sanctions order of July 28, 2008. Marcone
appeared at the hearing to represent Otter. Marcone, however, was then serving a two-
year suspension and the Court found that because he had never entered an appearance on
behalf of Otter, his representation of Otter would not fall within the provision of the
suspension order permitting him to “wind up” his practice. The Court denied Otter’s
request for a continuance, and denied as untimely his motion to vacate the July 28, 2008
order imposing sanctions.
The hearing on the motions for contempt went forward. Claiming that he lacked
the financial resources to pay the sanctions that had been imposed, Otter submitted his
2008 income tax return, and informed the District Court that his law practice had grossed
under $1,000 since the beginning of 2009 and that he had “received notices” that he was
behind on his electric and phone bills. He stated that his “non-compliance has not been

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The March 5, 2009 order also entered judgment in favor of IBC against the other5
plaintiffs in the initial litigation. Those parties are not involved in this appeal.
Otter also argues, without citing any supporting case law, that by preventing6
Marcone – a suspended attorney – from representing him at his contempt hearing, the
Court “denied Otter his right to counsel . . . in violation of his Sixth Amendment rights.”
(Appellant’s Br. at 8.) As this was not a criminal proceeding, the Sixth Amendment was
not implicated. See Fadiga v. Att’y Gen., 488 F.3d 142, 157 n.23 (3d Cir. 2007) (“As a
matter of formal constitutional doctrine, the Sixth Amendment right to (effective) counsel
does not apply in a civil context.”).
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willfull,” and that although he would have liked to comply with the sanctions order, he
“simply [did] not have the funds to do that.” (March 5, 2009 Hearing at 20, 21.) The
Court then addressed the Commonwealth and IBC: “What do you want me to do? You
can’t get blood from a stone, and the argument he’s making is that he doesn’t have the
capacity to comply, so it’s not a willful disobeyance of my order.” (Id. at 23.)
Following the hearing, the District Court issued a written order holding Otter in
contempt of the July 28, 2008 order imposing sanctions and entering judgment on that
order. The March 5, 2009 order did not make a finding as to Otter’s ability to pay those5
sanctions. Otter appealed.
DISCUSSION
Otter argues that he should not have been held in contempt because his
disobedience of the District Court’s order instructing him to pay to attorneys’ fees was
not willful but, rather, was a result of his being in “desperate straits” financially.6
(Appellant’s Br. at 6, 9.)
We review an order holding a party in contempt for abuse of discretion, and will

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Otter does not dispute Appellees’ characterization of the contempt order as “civil.”7
Where, as here, a party “fail[s] to comply with a valid court order,” civil contempt is
imposed. United States v. Harris, 582 F.3d 512, 514 (3d Cir. 2009).
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reverse only where the decision “is based on an error of law or a finding of fact that is
clearly erroneous.” Marshak v. Treadwell, __ F.3d __, 2009 WL 1886153, at *4 (3d Cir.
2009) (quoting Roe v. Operation Rescue, 54 F.3d 133, 137 (3d Cir. 1995)); see Harris v.
City of Phila., 47 F.3d 1311, 1321 (3d Cir. 1995). In order for a party to be held in civil
contempt, three elements must be established by clear and convincing evidence: “(1)7
that a valid order of the court existed; (2) that the defendant had knowledge of the order;
and (3) that the defendant disobeyed the order.” Berne Corp. v. Gov’t of the V.I., 570
F.3d 130, 139 (3d Cir. 2009) (citation omitted). To the extent there are ambiguities in the
evidence, they “must be resolved in favor of the party charged with contempt.” John T. v.
Del. County Intermediate Unit, 318 F.3d 545, 552 (3d Cir. 2003). Because “willfulness is
not a necessary element of civil contempt . . . , [any evidence of defendant’s] good faith
does not bar the conclusion . . . that [the defendant] acted in contempt.” Robin Woods
Inc. v. Woods, 28 F.3d 396, 399 (3d Cir. 1994) (quoting Harley-Davidson, Inc. v. Morris,
19 F.3d 142, 148-49 (3d Cir. 1994)). The Supreme Court has explained, however, that in
“a civil contempt proceeding . . . a defendant may assert a present inability to comply
with the order in question. United States v. Rylander, 460 U.S. 752, 757 (1983).
Similarly, we have recently made clear that “an order of civil contempt [is or will
become] punitive if a contemnor is unable to comply with the order.” United States v.

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Harris, 582 F.3d 512, 520 (3d Cir. 2009). While the party raising the impossibility
defense has the burden of proving it, courts “will not be blind to evidence that compliance
is now factually impossible.” Rylander, 460 U.S. at 757.
Otter does not argue that he did not violate a known court order imposing
sanctions; rather, the thrust of his argument is that the District Court “disregarded the
financial evidence presented at the contempt proceeding,” which he claims demonstrates
his inability to pay the ordered amount. (Appellant’s Br. at 7.) At the contempt hearing,
Otter presented the Court with his 2008 tax return while explaining, “I tried to comply
with the Court’s order, but I simply do not have the funds to do that.” (March 5, 2009
Hearing at 20.) He informed the Court that although he might eventually be able to make
some payments if he was successful in his representation of various clients in pending
matters, “$40,000 would just bankrupt [him].” (Id. at 27.) Despite recognizing Otter’s
precarious financial state at the hearing when it observed that “[y]ou can’t get blood from
a stone,” the Court made no findings orally or in its written order as to whether Otter was
then unable to comply with the order or would be unable to do so in the foreseeable future
and, if so, whether an order of civil contempt would be punitive. This was an abuse of
discretion.

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CONCLUSION
We will vacate the March 5, 2009 order of the District Court insofar as it holds
Otter in civil contempt, and will remand this matter for further proceedings consistent
with this Opinion.

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